Are your business intelligence systems and processes geared to allow you to plan ahead, or is your management information still stuck in “what happened last week” mode?
Alright – so that’s a bit of a trick question. Amidst the doom and gloom of all of the Christmas trading forecasts and the confusion around Brexit , it would be hard to imagine that anybody was looking forward to this year’s trading, except in as much as it would be a relief to have got through the “festive season.” The point of the question is not to ask whether you think next year’s trading will be easy, but instead to ask whether your business intelligence systems and processes are geared to allow you to plan ahead, or whether your management information is still stuck in “what happened last week” mode.
Traditionally, retailers have looked backward at performance and have created a variety of complex analyses like rolling historical summary and comparison reporting. Some have even adopted the “what happened yesterday” approach and have focussed on daily information, as though the universal panacea to retail ills lay in infinite detail. This approach has proved useful in that it has allowed retailers to analyse historic data and to extrapolate from it on an ad hoc basis. Inevitably though, this is analogous to driving a car using the rear view mirror. The journey would be a lot safer if you can see what is coming your way on the road. The problem here, of course, is that as we can’t actually see the future, the best options we currently have tend to be more like driving in thick fog!
So what can retailers do to illuminate the road ahead and as a result add value to their business intelligence investments? At a very basic level, retailers need to ensure that departmental plans are creating key performance indicators that can be used to measure what is going on. Almost by definition such planning is done at a summary level and does little more than set out some mileposts and provide motorway style signposts for the business “drivers” to monitor as they journey through the selling period. At a more sophisticated level, we might expect to see a set of coherent, systematic and integrated corporate plans, where management uses performance management to validate their own decisions and to see how their decisions impact those of their colleagues in related functions throughout the organisation. This approach is now becoming known as “business performance management,” or BPM. (Interestingly, although BPM. is fast becoming a buzz word in business intelligence, it dates back to 1989 when it was originally coined by Howard Dresner, then a research analyst at Gartner.)
As one vendor puts it “If you can visualize the impact of your next move before you commit to it and are agile enough to act decisively, you can outperform your peers.” BPM is a bit like having a satellite navigation system. You know where you want to get to, and if you deviate from the route, you find out quickly. Beyond basic BPM and at today’s cutting edge, we might see real time optimisation driving such decisions as what to mark down and when. To finish off our driving analogy, this is a bit like activating the traffic option on your sat-nav subscription. You get automatic re-routing when things get tough. Just like in the real world though, you still have to have experience and know when to ignore the suggestions – as I found out when using my own sat-nav in the Republic of Ireland last summer! It was very instructive to realise how difficult it was to rebel against the obviously incorrect instructions I was getting. It cost me 20 minutes and a few Euro of petrol – in retail decision support, the risks are obviously considerably higher!
The benefits of forward-looking business performance management as opposed to simple reporting should be immediately evident to retailers. The ability to create plans and analyse using dashboarding, decomposition analysis, drill-down and scenario modelling give a huge level of empowerment to key managers in areas like supply chain, merchandise planning, assortment planning, store operations and finance. The goal is to have decisions made sooner, with greater accuracy and at a greater level of detail than was previously possible.
Another big win from moving to a more structured and forward looking way of working is that it places a great emphasis on the development of efficient, best practice business processes. Retrospective analysis does not impose many specific requirements on process, whereas in order to plan, you have to define a path in advance which implies a structured and documented approach to doing business. In truth, this is where many retailers fall down, with too much of the business done by traders who fly by the seat of their pants. In some organisations, this type of approach is even seen as desirable; but for every successful maverick, there are countless, less well documented, examples of spectacular crashes, some of which cost the business very dear indeed. By contrast, BPM enhances processes by creating better feedback loops. The continuous process of planning, analysis and reaction ensures that problems are identified and acted upon before they have a chance to grow to a significant size.
When fully embraced, business performance management requires the collaborative involvement of users from all over the business. The applications tend to crystallise across a business with individual departments piloting the process and joining up with other departmental plans as the success of the implementations are proven and the benefits cases become ever easier to make. Some applications will necessarily remain specialised, point, solutions (for example planogramming), whereas others can be based on more generalised reporting and planning solutions (for example, merchandise planning, financial budgeting and DC planning). Whatever software platforms are used have to be very flexible if the points of contact between the disparate plans are to be managed and maintained in an environment that changes as fast as retail. It is no good having a vendor quoting modifications that will take six months to a year to programme in a business where change is the only constant!
In the course of writing this article, I have seen bulletins arrive by e-mail that have started to contradict the doom and gloom scenarios that I was reading earlier in the week. Apparently, the “Christmas rush curve” is getting steeper as we leave our shopping until later and later and sales are suddenly picking up. Those with effective BPM systems may have already seen this. Some of the others may have joined the rush to early mark downs, buying volume at the cost of final achieved margins. Whichever camp you belong to, I hope your Christmas was a happy one and that your 2019 is suitably prosperous!